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Alternate Universe in Colorado: Financial Institution Allowed to Use Alternative Apportionment

By Zachary Atkins and Pilar Mata 

The Colorado Department of Revenue issued a

By Zachary Atkins and Pilar Mata 

The Colorado Department of Revenue issued a private letter ruling permitting a financial institution to deviate from Colorado’s special industry rules and use an alternative method of apportionment for corporate income tax purposes. The taxpayer, a savings and loan holding company with subsidiaries separately engaged in broker-dealer and banking activities, had substantial receipts from investment and trading assets and activities. Under Colorado’s special regulation for financial institutions (Colo. Code Regs. § 201-3(1)(c)(xiii)), receipts from investment and trading assets and activities are sourced based on the location of the “regular place of business of the taxpayer,” which is determined based on the location of the day-to-day decisions regarding the assets and activities. The taxpayer argued that an alternative apportionment methodology was warranted because this rule failed to reflect the location of the taxpayer’s market and instead reflected the taxpayer’s costs of performance. The Department concurred and, with respect to receipts from investment assets and activities, permitted the taxpayer to calculate its Colorado sales factor numerator based on the ratio of total deposits from Colorado customer accounts to total deposits from all customer accounts. Colorado Dep’t of Revenue, PLR-13-001 (Jan. 24, 2013).

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